This is an action by employees
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of the Southeastern Pennsylvania Transportation Authority (SEPTA) to recover unpaid overtime wages allegedly due under § 7(a) of the Fair Labor Standards Act (FLSA), 29 U.S.C. § 207(a). Plaintiffs have moved for partial summary judgment on the issue of liability, contending that SEPTA, a political subdivision of the Commonwealth of Pennsylvania, is obligated to comply with the FLSA. For the reasons stated below, I will grant plaintiffs' motion.

Under the FLSA, employees must be paid for time worked in excess of 40 hours per week at a rate of one and one-half times their normal pay rate. 29 U.S.C. § 207(a)(1). The statutory work week includes all time spent performing activities which "are an integral and indispensable part of the principal activities for which covered workmen are employed." Steiner v. Mitchell, 350 U.S. 247, 256, 100 L. Ed. 267, 76 S. Ct. 330 (1956).

When the FLSA was passed in 1938, it specifically excluded states and their political subdivisions from its coverage. Since 1961, however, Congress has gradually broadened the FLSA's coverage. As amended in 1974, the FLSA imposes minimum wage and maximum hour requirements upon most public employers, specifically including states and their political subdivisions. See National League of Cities v. Usery, 426 U.S. 833, 836-39, 49 L. Ed. 2d 245, 96 S. Ct. 2465 (1976).

The pre-Garcia agreement between SEPTA and its employees provided for overtime compensation only after 45 hours of work. Certain hours spent performing work-related activities were not included in the computation of overtime. SEPTA recognizes that Garcia requires it to modify its compensation practices in accordance with the FLSA. The dispute between the parties concerns SEPTA's pre-Garcia liability. Plaintiffs contend that even before Garcia was decided the Third Circuit had held that operation of a local mass transit system was not a traditional state or local government function, and that a publicly owned transit authority was therefore subject to the FLSA. See Kramer v. New Castle Area Transit Authority, 677 F.2d 308 (3d Cir. 1982), cert. denied, 459 U.S. 1146, 74 L. Ed. 2d 993, 103 S. Ct. 786 (1983). Accordingly, plaintiffs claim they are entitled to unpaid overtime wages as of April 30, 1982, the date of the Kramer decision. They have moved for partial summary judgment on the ground that Kramer controls the question of SEPTA's liability. SEPTA, in opposing plaintiffs' motion, contends that Kramer was wrongly decided. SEPTA also argues that much of the Kramer opinion is dictum, and that the case is distinguishable.

I note first that, contrary to SEPTA's apparent desire that I do so, I am not free to reconsider or reject the Third Circuit's holding in Kramer. Kramer remains the law of this circuit unless or until it is overruled.
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I will therefore confine myself to the question of whether Kramer, as a matter of law, precludes SEPTA from arguing that it was exempt from the FLSA until the Supreme Court decided Garcia.

In Kramer, the Third Circuit concluded that "the operation of mass transit systems 'is not among the functions traditionally performed by state and local governments.'" Kramer, 677 F.2d at 310 (quoting United Transportation Union v. Long Island Rail Road Co., 455 U.S. at 686). The court emphasized that local mass transit systems have historically been privately owned and operated. State involvement became common only after Congress passed the Urban Mass Transportation Act of 1964, 49 U.S.C. § 1601 et seq., which provided for federal assistance to state and local governments operating transportation systems. According to the Third Circuit, "the whole move away from private transit systems and into public systems was started and effected by the federal government which provided the financial support to allow the change-over to public transportation companies." Kramer, 677 F.2d at 310. Moreover, the federal government is actively involved, both financially and otherwise, in local mass transportation. The Third Circuit thus held that "the states are precluded from claiming, at this late date, that mass transit is a service which they traditionally provide." Id.

SEPTA claims that the Third Circuit's broad language is dictum, and that Kramer stands only for the proposition that the New Castle Area Transit Authority was not performing traditional governmental functions. Thus, SEPTA contends, it must be given the opportunity to demonstrate that its role is different.

SEPTA claims its scope of operations and its long history of local government involvement distinguish it from the New Castle Area Transit Authority. In addition, SEPTA stresses that the federal government's only role in southeastern Pennsylvania's local mass transportation systems has been as a limited funding source.

As plaintiffs contend, however, similar evidence and arguments were before the Third Circuit when it decided Kramer. In support of their position, plaintiffs have submitted two affidavits which were filed in Kramer. The affidavit of John A. Christofer, General Manager of the New Castle Area Transit Authority, stated that the Authority was created by the municipality of New Castle in 1958 and received no federal funding until 1979-80. The affidavit of Herbert J. Scheuer, Executive Director-Administration of the American Public Transit Association, set forth a detailed history of state and local government involvement in mass transportation, beginning in the early 1900s. The Third Circuit cited the Scheuer affidavit as authority for several factual assertions. Kramer, 677 F.2d at 309-10. Nevertheless, the court held that "the state involvement in local transit systems, increasing with more systems coming under state control in recent years, does not alter the 'historical reality' that the operation of mass transit systems" is not a traditional governmental function. Id. at 310.

This statement, in my view, disposes of SEPTA's factual arguments and mandates entry of partial summary judgment in favor of plaintiffs.
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Although the question of Kramer's effect upon this case is a controlling question of law, I cannot conclude that there is substantial ground for difference of opinion. Clearly, opinions may and do differ as to whether the holding in Kramer is desirable as a matter of social policy. I can perceive little ground, however, for questioning either that Kramer governs this case or that it is consistent with Supreme Court precedent. See United Transportation Union v. Long Island Rail Road Co., 455 U.S. 678, 71 L. Ed. 2d 547, 102 S. Ct. 1349 (1982) (operation of a railroad in interstate commerce is not a traditional governmental function). See also Garcia, 53 U.S.L.W. at 4142; Dove v. Chattanooga Area Regional Transportation Authority, 701 F.2d 50 (6th Cir. 1983); Alewine v. City Council, 699 F.2d 1060 (11th Cir. 1983) (relying on Kramer in holding that public mass transit is not a traditional governmental function), cert. denied, 470 U.S. 1027, 105 S. Ct. 1391, 84 L. Ed. 2d 781 (1985); Joiner v. City of Macon, 627 F. Supp. 1532, 1536 (M.D.Ga. 1986) ("even after the Supreme Court's decision in National League, the federal appellate courts . . . and the U.S. Department of Labor regulations . . . consistently applied FLSA to publicly owned mass transit systems."). Accordingly, I will deny SEPTA's request for certification under § 1292(b).

ORDER

This 23rd day of June, 1986, it is

ORDERED that:

1. Plaintiffs' Motion for Partial Summary Judgment is GRANTED;

2. Defendant's Request for Certification of this Order as immediately appealable under 28 U.S.C. § 1292(b) is DENIED.

APPENDIX A

STIPULATION OF FACTS

The Plaintiffs and the Defendant, Southeastern Pennsylvania Transportation Authority ("SEPTA" or the "Authority"), by their undersigned attorneys, stipulate and agree, for purposes of this litigation only, to the following facts and to the authenticity of the documents identified herein:

I. PRESENT LEGAL AND OPERATIONAL STRUCTURE OF SEPTA

1. SEPTA is an instrumentality of the Commonwealth of Pennsylvania, presently organized and existing under the provisions of the Pennsylvania Urban Mass Transportation Law, 55 P.S. § 600.101 et seq. (the "UMTL"). SEPTA's creation and continued existence is authorized by Section 600.303(a) of the UMTL. The UMTL was enacted by the Pennsylvania Legislature based upon the following legislative findings and policy declarations:

"(a) It is hereby determined and declared as a matter of legislative finding:

(1) That there exists in the urban and suburban communities in metropolitan areas, traffic congestion and serious mass transportation problems because of underdeveloped, uncoordinated obsolete mass transportation facilities resulting in inadequate or overcrowded high cost conditions on our highways and existing mass transportation facilities.

(3) That the foregoing conditions cannot be effectively dealt with by private enterprise under existing law without the additional aids herein granted and are beyond remedy or control by governmental regulatory processes.

(4) That the sound replanning and redevelopment of metropolitan mass transportation facilities in accordance with sound and approved plans for their promotion, development and growth will promote the public health, safety, convenience and welfare and that the public acquisition of existing mass transportation facilities in accordance with the said sound plans for their redevelopment and promotion will promote the public health, safety, convenience and welfare.

(5) That the well-being and economic health of the counties and other communities in the metropolitan areas require integrated systems of mass passenger transportation.

(6) That it is desirable that the public transportation systems in the metropolitan areas be combined, improved, extended and supplemented by the creation of authorities as herein provided.

(7) That the establishment of metropolitan transportation authorities will promote the public safety, convenience and welfare.

(8) That it is intended that such authorities cooperate with and/or acquire existing transportation facilities that private enterprise and government may mutually provide adequate transit facilities for the convenience of the public.

(9) That it is intended that any authority created hereunder will cooperate with all municipalities and other public bodies in whose territories it operates so that the mass passenger transportation system may best serve the interests of the residents thereof.

(b) Therefore, it is hereby declared to be the policy of the Commonwealth of Pennsylvania to promote the safety and welfare of the inhabitants thereof by authorizing the creation of a body corporate and politic for each metropolitan area, to be known as the transportation authority of such area, which shall exist and operate for the purposes contained in this article. Such purposes are hereby declared to be public uses for which public money may be spent and private property may be acquired by the exercise of the power of eminent domain."

55 P.S. § 600.301.

2. SEPTA is governed by a Board of Directors consisting of two members each appointed by the City of Philadelphia and the Counties of Bucks, Chester, Delaware and Montgomery; and one member appointed by the Governor of Pennsylvania.

3. Section 600.303(d) of the UMTL vests SEPTA with, among other powers and duties, the following:

"(15) To acquire by eminent domain any real or personal property including improvements, fixtures and franchises of any kind whatever for the public purposes set forth in this article in the manner hereinafter provided.

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(25) To act as agent of the State, or of the Federal Government or any of its instrumentalities or agencies, for the public purposes set out in this article.

(26) To conduct examinations and investigations and to hear testimony and take proof, under oath or affirmation at public or private hearings, as hereinafter provided, on any matter material to the public purposes set forth in this article.

(27) To make available to the government of a municipality or any appropriate agency, board or commission thereof, the recommendations of the authority affecting any area in the authority's field of operation or property therein, which it may deem likely to promote the public health, morals, safety and welfare.

4. Section 600.340 of the UMTL vests SEPTA with the authority to conduct public hearings and investigations, administer oaths and subpoena witnesses.

"(a) The board may investigate all means of transportation and the management thereof, the enforcement of its resolutions, rules and regulations, and the action, conduct and efficiency of all officers, agents and employees of the authority. In the conduct of such investigations, the board may hold public hearings on its own motion and shall do so on complaint or petition of any municipality in the metropolitan area. Each member of the board shall have power to administer oaths and the secretary, by order of the board, shall issue subpoenas to secure the attendance and testimony of witnesses and the production of books and papers relevant to such investigations and to any hearing before the board or any member thereof, or any officers' committee or employees' committee, appointed by the board to hear any complaint of an officer or employee who has been discharged or demoted.

(b) Any court of record of this Commonwealth, or any judge thereof, either in term time or vacation, upon application of the board or any member thereof may, in his discretion, compel the attendance of witnesses, the production of books and papers, and giving of testimony before the board, or before any member thereof, or any officers' committee or employees' committee, appointed by the board by attachment for contempt or otherwise, in the same manner as the production of evidence may be compelled before said court."

5. SEPTA is the third largest public transit agency in the United States. In fiscal 1984, SEPTA carried an average of 1,224,000 passengers each day for a total of 256,000,000 passenger trips that year.

6. SEPTA is organized into City and Suburban Transit and Commuter Rail Divisions operating through the City of Philadelphia, Bucks, Chester, Delaware and Montgomery Counties.

II. HISTORY OF PHILADELPHIA MASS TRANSIT

7. The first hourly stage coach service in Philadelphia began in 1831. This service was replaced by horsedrawn streetcars. Private streetcar companies grew in number throughout the early 1850's.

8. The proliferation of private street car lines and the resulting conflicts among them, disputes over street maintenance and the like led in 1855 to the formation by the Philadelphia Common Councils of a "Special Committee on City Passenger Railroads." In particular, the City could not then afford to build a system of its own, but many objected to the profits which would follow the grant of exclusive, private franchises. The result of the Committee's investigation was a report by Chief City Engineer Strickland Kneuss recommending a franchise system and concluding:

"If it is advisable (and I agree such is the case) that a commitment be made at once, such contracts [i.e., franchises] should be entered into with capitalists who seek the investment, as will enable the City to obtain the possession of the roads as soon as the financial condition of its treasury will permit, or whatever arrangement to reach that point Council may decide upon."

10. The franchisees were also required to repair and maintain the streets over which they operated. This latter obligation was reasserted as to all franchises by ordinance in 1874. Between 1857 and 1874, 39 street railway companies were formed in Philadelphia. During this same period of time, those companies which did exist were allying and, later, merging with each other. On May 24, 1859, the Board of Presidents of City Passenger Railway Companies was formed to attempt standardized rates through common regulations. In 1883, the Philadelphia Traction Company was formed for the purpose of buying or leasing the rights and equipment of existing smaller companies. This trend continued and, by 1893, all but one of the 39 companies were owned, or their property leased by, three large companies: the Philadelphia Traction Co., the Electric Traction Co., and the Peoples' Traction Co.

11. On September 6, 1895, virtually all of the street railway lines merged to form the Union Traction Company. Disputes arose almost immediately as Union attempted to use its monopoly power to raise fares and end free transfers. By December 5, 1895, the Common Councils had threatened to exercise the City's reserved rights of purchase contained in the franchises of Union's underlying companies. This controversy continued through 1902.

12. In 1902, Union merged with the remaining street railway companies to form the Philadelphia Rapid Transit Company (the "PRT"). Between 1902 and 1907, the PRT and the City engaged in ongoing negotiations. In 1907, the parties reached agreement. The 1907 agreement, a copy of which is attached as Exhibit "A", was ratified by the Common Councils and provided, among other things:

(a) The PRT could not increase its debt or make capital expenditures without approval of the city;

(b) The City was given the right to insist upon capital improvements it desired.

(c) The City was given three seats on the PRT Board of Directors;

(d) The PRT was required to file sworn financial statements with the City and could not pay dividends of more than six percent of post 1907 capital additions without a like payment to the City;

(e) the PRT assigned to the City its right (obtained from a predecessor) to build the Broad Street subway;

(f) The PRT was required to establish a sinking fund for the City's benefit; and

(g) The City reserved the right to purchase the PRT at stated capital value on or after July 1, 1957 and to use the sinking fund for that purpose.

13. The decade of 1910-1920 passed without further agreement between the City and the PRT with respect to the construction of new subway and train lines.

14. In 1913, the Pennsylvania Legislature authorized cities of the first class to form and operate their own transit operations. A copy of the legislation is attached as Exhibit "B". Philadelphia formed a Department of Public Transit in that year and its Commissioner recommended (a) building new subway routes, including the Broad Street Line; (b) a train line to Darby; (c) a train line to Camden and (d) City creation of its own operating transit system if the PRT did not accede to the City's plans.

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